Nearly Half Of Homeowners Leave The Making Home Affordable Loan Modification Program

I recently wrote about the Making Home Affordable Loan Modification program that the Obama administration passed. The program was put in place to help homeowners to get some help in tough situations where they were having a hard time making their regular mortgage payments. If they were able to prove that they needed help and their mortgage was more than 31 percent of their income, the interest rates on their loans could be substantially be reduced, and in some cases principal reduced.

Government Modification Program Effectiveness Questioned

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Since the program started over 1.3 million homeowners have enrolled in the program in order to get some help and get their mortgage payments reduced. The problem is, the program just hasn't been as effective as hoped, and the tide of foreclosures has continued.

Nearly half of the 1.3 million homeowners who enrolled in the Obama administration's flagship mortgage-relief program have fallen out.

The program is intended to help those at risk of foreclosure by lowering their monthly mortgage payments. Friday's report from the Treasury Department suggests the $75 billion government effort is failing to slow the tide of foreclosures in the United States, economists say.

More than 2.3 million homes have fallen into foreclosure since the recession began in December 2007, according to foreclosure listing service RealtyTrac Inc. Economists expect the number of foreclosures to grow well into next year.”The government program as currently structured is petering out. It is taking in fewer homeowners, more are dropping out and fewer people are ending up in permanent modifications,” said Mark Zandi, chief economist at Moody's Analytics.

So of the 1.3 million who enrolled in the mortgage modification program, almost 50 percent of the people have fallen out of the program either because they couldn't keep up with their reduced payments, didn't file their paperwork correctly, or some other reason. Many have complained that the program is a complete mess with neither the government or the banks knowing which end is up.

Many borrowers have complained that the government program is a bureaucratic nightmare. They say banks often lose their documents and then claim borrowers did not send back the necessary paperwork.

The banking industry said borrowers weren't sending back their paperwork. They also have accused the Obama administration of initially pressuring them to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.

So everyone is blaming everyone else for the problems the program has had. Borrowers blame the banks and the government. The banks blame the consumers and the government. The government blames them both. My guess is that the program was ill conceived from the get-go, and it was destined for failure. At this point only $490 million has been spent out of a potential $75 billion the government has made available to help stem the wave of foreclosures.

Approximately 630,000 people who had tried to get their monthly mortgage payments lowered through the government program have been cut loose through July, according to the Treasury report. That's about 48 percent of the those who had enrolled since March 2009. And it is up from more than 40 percent through June.

Another 421,804, or roughly 32 percent of those who started the program, have received permanent loan modifications and are making their payments on time.

RealtyTrac reported that the number of U.S. homes lost to foreclosure surged in July to 92,858 properties, up 9 percent from June. The pace of repossessions has been increasing and the nation is now on track to having more than 1 million homes lost to foreclosure by the end of the year. That would eclipse the more than 900,000 homes repossessed in 2009, the firm says.

To me it makes sense that only 32 percent of homeowners who entered the program have been able to get permanent modifications. After all, many of them only entered the program because they didn't have enough income to make payments. Where is the money going to come from even if the payments are reduced?

What do you think about the Making Home Affordable Loan Modification program? Do you think it was destined to fail? Have you tried to take part in the program only to get the run around? Tell us your thoughts on the MHA Modification program in the comments.

Comments

I am in a 3 mo. trial period, so they say. To get here I sent in a five inch package of docs. The docs were asked for by Chase attorneys. I was sent a letter from Chase stating that my HAMP request was denied because I failed to send in the docs. When I proved to them that I sent the docs they said they wanted them again with additional information that they didn’t ask for in the first place. Then Chase said my application for HAMP was denied because I didn’t qualify. Then I called the HAMP Hotline for a counselor. He held a coference call with Chase who told us that I did qualify. They offered me a payment reduction of $100 per month. I told them that the payment was still 60% of my new income and complained that I had to buy food. After an unbelievable series of events, recorded on my blog, Chase lowered my payment to an amount closer to 31% of my income. Here’s the kicker, I kept my payments timely and sent all requested docs. But, two weeks before the 3 month trial period was over Chase sold my file to IBM LBPS who told me that I had to start all over again. I called the HAMP Hotline and the counselor told me, “well, that business, business isn’t fair”. I said, “You say they can do that?”, “Yes they can”.

Wow, that’s quite the story. Unfortunately it sounds pretty familiar – as a lot of people seem to be getting that same run-around with supposedly “lost” documents, being denied, etc. It really is quite a mess.

I am living this nightmare as well only we’ve given up. The fees and penalties that got tacked on from being a few payments behind made it impossible for us to ever be a head. Trying to pay$1600/mon to catch up on a $120 mortgage was killing us. I only brought home $2200 cash a month after a large paycut my company took. We finally said enough. After several months of silence we get a call from our lender First Franklin loan servicer for BOA and they tell us about the HAMP program. I fit the criteria perfectly. I provided everything. I double faxed, emailed, certified mailed. We completed our 3 month trial and were told the final mod papers would be sent. Everything was all set. I looked past all the negative press thinking, those people must be doing something wrong, that won’t happen to us. Then we get a letter saying our account was sold to Saxon Mortgage. I looked them up online and my heart sank like a concrete block. First Franklin said all Saxon had to do was send over the final mod papers. They did not and said we had to start all over with them since it went passed 90 days. I sent the everything they asked for. There was nothing special about our circumstances or paperwork. 4x in 1 month and were told it wasn’t received or it was received and something was missing. While on the phone with a HAMP person a collection officer would be calling from the same company over past due payments! We thought it just has to be oversight or wires crossed on their end. We were concerned the next payment would be due and we didn’t want to be late. My husband talks to an agent who tells him he had just gotten 150 cases dumped on him this week and his office got 4000 new cases this month alone. He could not confirm when he would get to us. He said go ahead and send your payment. My husband says to who? We couldn’t get any confirmation as to how much and who. Over this past month we have received: 2 letters saying we don’t qualify for the HAMP program, Another letter saying they may be able to help us if we apply for the Hamp Program. Another letter came and asked us to please send proof of our Home Owner Association Agreement and amount of Dues (We don’t have such a thing) Another: Please send proof of insurance on the house. Another: Do we receive rent for the mobile home that is on our property? We live in the middle of a subdivision.
We are not sending them a dime. We are done. I can’t take it anymore. There is no hope. We are saving up our “payment” money and will rent somewhere when they decide to kick us out. My husband is disabled and I am the only income for us. We don’t live high on the hog, no credit cards, no car payments, no cell phones, flat screen tvs, no cable. This is the 3rd home I’ve owned. It’s a shame but I’m not going to be held hostage to this nightmare anymore. Best of luck to all.

I think this program was doomed from the start. It should have been clear that many of these homeowners couldn’t afford even the reduced payments on their homes! Most government run programs are grossly inefficient and not well thought out.

We saw the same thing with the “cash for clunkers” program, the homebuyer’s credit, and now the loan modification program.

My fiance had the same problem as David except it was metlife/first horizon that ‘sold’ his loan to Lender Business Process Services…..what a NIGHTMARE. we have been on the phone with lbps for hours on end for 5-6 months trying to figure out WHY they have us listed with late payments and WHY they started forclosure proceedings on the house, there was NO reason for it since we have made EVERY payment ON TIME since the first modification in April 2009!!!!!! in the end, we have been told that metlife 1. messed up the paper work 2. dropped the goverment funded home modification because they knew they were selling the loan and 3. there was nothing else we could do but restart another home modification…..

we have had all the paper work signed, notorized, shipped off, and accepted for well over a month and we are still receiving ‘computer generated’ notices that our payments are late. we call to see what is going on and they say ‘it takes time to upload your paper work for the modification into the system. just be patient with us. no your payments are not late they are just in suspense’

David, good luck with LBPS…and if you are talking to someone who is telling you something completely backwards from what you know is the truth, hang up and wait on hold for another hour and pray for someone who knows what they are talking about to pick up!!!!!!!!!!!

to all out there – there is hope i had a BOA loan at 2000/month and had it modified to $1000/month for 30 years – a god send it wasn’t easy – you have to keep a log of every call you make to who and what dept they are w/ what they name and employee ID3 is and what phone # you called, and what was siad to you and you must keep organized copies of everything that you send out and you stay on them – it does work I’m proof of that but they don’t make it easy

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